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Marketplace Fairness Act Could Level Retail Playing Field

April 15, 2013

The latest version of the Marketplace Fairness Act, introduced on Feb. 14, would tax online sales at the same rates those items are taxed in stores, and could shake up the current retail landscape.

The legislation was proposed in an effort to close the loophole that lets online retailers like Amazon avoid charging sales tax where they don’t have any physical stores or warehouses, and many believe the bill will pass. It includes an exemption for online sellers who made less than $1 million in the previous calendar year.

Supporters of the “e-fairness” bill contend that although people who shop at such sites are supposed to keep track of their purchases and pay the sales tax owed with their income taxes, less than 1 percent actually do, taking away billions in tax revenues from states.

States could have collected more than $23.3 billion in sales tax revenue from online sellers in 2012, according to the National Conference of State Legislatures.

Proponents of the bill also believe consumer sentiment is more sympathetic to brick-and-mortar retailers hurt by competition from Internet sellers. A recent survey by the International Council of Shopping Centers found that 59 percent of consumers support requiring online retailers to collect sales tax when people buy online, and 82 percent support federal legislation that dictates that consumers who buy online should pay the same sales tax as those who buy in-store.

Shoppers have also said that they prefer paying sales tax at the point of purchase rather than having to keep track of what they bought and report the extra taxes on their income taxes.

Amazon, the world’s largest online retailer, currently charges sales tax in seven states but has cut deals in others to postpone collecting taxes, sometimes as part of incentives to build warehouses there. Amazon says it would prefer a federal law that applies to everyone rather than having to comply with different rules in every state.